CSUF Finance Professor Addresses Congressional Subcommittee

LaCour-Little Discusses the Home Mortgage Disclosure Act

July 30, 2007

CSUF finance professor Michael LaCour-Little testified July 25 before
the Subcommittee on Oversight and Investigations on the issue of “Rooting
Out Discrimination in Mortgage Lending: Using the Home Mortgage Disclosure
Act (HMDA) as a Tool for Fair Lending Enforcement.”

LaCour-Little
discussed patterns he found in 2004-05 HMDA data, including an increase
in the number and percentage of higher-cost loans and differentials across
racial and ethnic groups. Three possible reasons he stated for the increase
were changes in lender business practices, changes in borrower credit profile
and changes in the interest rate environment.

“It
is important to remember that the new HMDA data does not contain information
on many of the factors that affect credit risk and the economics of
mortgage lending,” he reported. “As a result, the new HMDA
data is sufficient neither to explain the pricing of loans nor to draw
conclusions about pricing fairness. At best, the bank regulatory agencies
can use HMDA data as a preliminary screening tool to identify markets or
institutions for further scrutiny.”

LaCour-Little
reported that he did not find an increase in average borrower risk in
2005, although “there
does appear to be an increase in the use of riskier products, such as
loans that allow negative amortization [increase in principal by an
amount in which loan payments fall short of the interest due] and the average
loan-to-value ratio did appear to increase for home purchase loans during
2006. ”

LaCour-Little’s
remarks were based on research he conducted for a paper he presented
in May at the midyear meeting of the American Real Estate and Urban
Economics Association.

A member of
the CSUF’s faculty since 2005, LaCour-Little is executive vice president
of the American Real Estate and Urban Economics Association and a former
executive at Citigroup and Wells Fargo. More than 20 articles he has written
on housing finance have been published.

Related Audio:

Listen to an interview with LaCour-Little about a 2008 study on home mortgage lending in Orange County that aired on KBPK’s “California Commerce.”